Fed stimulus could send gold skyrocketing: traders, brokers
By Nongnapas Pithapatee, The Nation/Asia News NetworkBANGKOK--The price of gold could return to a record high this year if the U.S. Federal Reserve decides to inject more liquidity into the economy under a third round of quantitative easing, according to some global traders and brokers.
September 13, 2012, 12:02 am TWN
Meanwhile, Barclays Research warned that Thailand and other Asian countries would be hit by the economic downturn in Europe.
Gold prices are likely to soar to a new high, exceeding US$1,920 per by year-end, according to Pawan Nawawattanasub, vice president of YLG Bullion International.
Even if there is no more quantitative easing in the U.S., gold will remain high at above US$1,730 per ounce, she said.
The investment return in gold futures in the first eight months of the year was 7.98 percent, a level that is expected to rise to 10 percent for the full year, the same as last year's return, she said.
Gold futures trading has doubled, soaring from 487,000 contracts last year to 961,000 contracts already this year, Pawan said.
Tanasin Gleeblumjeak, managing director of Ausiris Futures, said the price of gold may not however exceed US$1,800 per ounce this year, due to profit-taking by traders.
The lowest price over the past two months was US$1,600, and the price of the precious metal is likely to go up in the short run, he said.
Kasikorn Researh Centre believes the U.S. Federal Reserve will take action by injecting more liquidity into the U.S. economy and maintaining a low policy interest rate beyond 2014.
The Fed will take action due to the stubbornly high unemployment rate of 8.1 percent in the U.S., the research house said, adding that the central bank is likely to purchase mortgage-backed securities in order to boost the real estate sector.
The Fed will also announce that it is maintaining a low policy rate for much longer than the previous target of late 2014. An extended period of low interest rates would help companies to plan their investment and could create more jobs, said Kasikorn Research Centre.
Meanwhile, Barclays Research said emerging Asian economies would not be immune from the European downturn.
Even though the European Central Bank has announced plans to purchase government bonds of troubled eurozone economies, an abrupt downturn in growth cannot be discounted.
The impact on Asia would be significant, with growth falling by 1.5 percentage points in the first half of next year, according to Barclays.
Growth in Thailand, Taiwan and South Korea could fall by about 3 percentage points in the same period, while smaller or more open economies like Singapore and Malaysia could be hardest hit, with growth down by 4.8 and 4 percentage points, respectively.